Monday, November 17, 2014

The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. [There's a lot about gas prices.--P.Z.] Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.

Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.

The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.

One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.

When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.

When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.

The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.

Wednesday, November 12, 2014

Monday, November 10, 2014

Anybody truly interested in government, and therefore politics, should be cognizant above all that ours have already entered systemic failure. The management of societal affairs is on an arc to become more inept and ineffectual, no matter how either of the current major parties pretends to control things. Instead of Big Brother, government in our time turns out to be Autistic Brother. It makes weird noises and flaps its appendages, but can barely tie its own shoelaces.

The one thing it does exceedingly well is drain the remaining capital from endeavors that might contribute to the greater good. This includes intellectual capital, by the way, which, under better circumstances, might gird the political will to reform the sub-systems that civilized life depends on. These include: food production (industrial agri-business), commerce (the WalMart model), transportation (Happy Motoring), school (a matrix of rackets), medicine (ditto with the patient as hostage), and banking (a matrix of fraud and swindling).

All of these systems have something in common: they’ve exceeded their fragility threshold and crossed into the frontier of criticality. They have nowhere to go except failure. It would be nice if we could construct leaner and more local systems to replace these monsters, but there is too much vested interest in them. For instance, the voters slapped down virtually every major ballot proposition to invest in light rail and public transit around the country.* The likely explanation is that they’ve bought the story that shale oil will allow them to drive to WalMart forever.

That story is false, by the way. The politicos put it over because they believe the Wall Street fraudsters who are pimping a junk finance racket in shale oil for short-term, high-yield returns. The politicos want desperately to believe the story because the background reality is too difficult to contemplate: an American living arrangement with no future.

The public, of course, is eager to believe the same story for the same reasons, but at some point they’ll flip and blame the story-tellers, and their wrath could truly wreck what remains of this polity. When it is really too late to fix any of these things, they’ll beg someone to tell them what to do, and the job-description for that position is dictator.

It’s certainly remarkable that the years since the troubles of 2008 have been so seemingly placid and uneventful, at least here in the USA — not so much if you live in the Middle East or Ukraine, or in the decaying economies of southern Euroland, or the septic failed states of Africa. The many formerly-middle-class Americans living in economic ruin apparently blame themselves when, for instance, they’re billed tens of thousands of dollars for some routine surgery performed “out of network” by a bureaucratic happenstance. They must be punch-drunk with cable news, or over-medicated. Don’t expect this national mood of paralysis and surrender to last indefinitely.

What troubles me at the moment is that when that mood snaps, it will be for a bad reason in the wrong way. Ferguson, Mo., is still sitting there like an unattended back-pack on the courthouse steps. Before Christmas, some kind of grand jury decision is going to come down. All the reality-based chatter points to the probable exoneration of Darren Wilson, the policeman who shot teenager Michael Brown. I expect the trouble arising out of that to be a lot worse than most people currently suppose, and then we’ll literally be off to the races. If that happens, it will be a huge and tragic diversion from the things that really matter to keep the project of civilized life going. In a way, it will be the true beginning of the end. The end of what? Of pretending that the people in authority know what they are doing.

If you think that President Obama is lonely and bereft now, just wait. Some excuse will be found to try an impeach him and then the nation will spend another two years conducting a three-ring circus while the shale oil “miracle” crashes and burns and the banking system melts away to nothing. It’s been fun watching Mitch McConnell get ready to preside over all of this. History could not have found a less sympathetic patsy.

Sunday, November 09, 2014

I came down with a cold on Tuesday. Though I'm still sick I feel much better than I did. I still want to write on my trips to Sacramento and Honolulu. Till then, here are some links to archivists on Twitter.

@archivesnext/Archivists on Twitter on Twitter
https://twitter.com/archivesnext/lists/archivists-on-twitter‎Cached Subscribe to Archivists on Twitter .... Wish more companies when they get rid of
archives programs would donate records to an archives @BASarchivists.